PNB fraude

Select PSU banks continued to reel under selling pressure on Thursday, including Punjab National Bank that fell nearly 14 percent intraday after it detected fraud worth USD 1.8 billion (Rs 11,333 crore).

The stock touched a fresh 52-week low of Rs 125.55 and lost more than 22 percent in two consecutive sessions. With the sharp fall, investors lost Rs 8,756 crore of wealth in two days.

PSU Bank index lost all morning gains to trade 1.5 percent lower as all stocks barring SBI (up 0.5 percent) were under pressure. Allahabad Bank, Bank of Baroda, IDBI Bank, Syndicate Bank, Union Bank, Indian Bank and Bank of India were down 1-4 percent.

Apart from PSU banks, some jewellery companies also involved in the fraud, which include Gitanjali Gems that crashed 20 percent to hit a 52-week low of Rs 46.90.

PNB, the country's second largest public sector lender, detected fraud transactions totaling over Rs 11,300 crore at its Mumbai branch. This led to the share price tanking 9.8 percent in previous session.

The fraudulent transaction amount is 2.55 percent of total loan book of Rs 4.5 lakh crore (as of December 2017). It is also 8 times of bank's FY17 net profit of Rs 1,324 crore.

"The bank has detected some fraudulent and unauthorised transactions (messages) in one of its branch in Mumbai for the benefit of a few select account holders with their apparent connivance. Based on these transactions other banks appear to have advanced money to these customers abroad," the third largest public sector lender had said on Wednesday.

The quantum of transactions is USD 1,771.69 million (approximately), it added. (1 US dollar - 64.15)

As per CNBC-TV18 report, PNB in its letter to banks said it addressed letter to chiefs of 30 banks informing them of fraud dated February 12 and found a junior branch officer issued unauthorised & fraudulent letter of undertaking (LoU) through SWIFT.

An LoU is a letter of comfort issued by one bank to branches of other banks, based on which foreign branches offer credit to buyers.

LoUs issued on behalf of some companies belonging to Nirav Modi Group companies, which include Solar Exports, Stellar Diamonds & Diamonds RU, it added.